Smarter than the Tories - but still, alas, a little accident-prone

When historians look back on the New Labour period, they may well conclude that the fundamental mistake made by both Tony Blair and Gordon Brown was to elevate 'outsmarting the Tories' into a central plank of policy as opposed to a useful stratagem to be employed sparingly.

The error for which Blair will never be forgiven by anyone whose judgment I trust will be involving this country in the disastrous invasion of Iraq. This was, I think, the decision of a weak man who did not want to be accused of weakness by the Conservatives (after all, even George W Bush told him he didn't have to go along with it). Unfortunately, under the British system of 'elective dictatorship' (the late Lord Hailsham's phrase) weak men can hold strong positions.

Unfortunately also, Blair's departure and the elevation of Brown have not yet produced a government of which we can be proud. Our Prime Minister seems to be accident-prone: people continually cite the non-election of last autumn and the reluctance to show his face with other European leaders in Lisbon. More recently, the abolition of the 10p income tax band in the 2007 Budget has come back to haunt him. And these are examples known to all, as is the case of Beijing and the Olympic Games, where - whatever the truth of the matter - the impression once again is of dithering. There is also talk of procrastination in many other spheres, although this is as yet confined to the Westminster and Whitehall villages.

The removal of the 10p tax rate has struck a dissonant chord. I fear the problem goes right back to the desire to outsmart the Tories; although it has been presented as a necessary part of a 'package' to help the poor (the poor with children, that is), the fact of the matter is that it was part of a package to help the not-so-poor, via the cut in the basic rate of income tax from 22p to 20p. At the time, I described the 2007 budget as a Conservative budget. It fitted, all too well, the pattern of a 'New' Labour government obsessed with the desire to outsmart the Tories at the expense of what was left of its traditional principles.

A Tory Chancellor, Kenneth Clarke, once told me he lost interest in tax reform when he discovered there were always losers as well as winners. As the increasingly impressive House of Commons Treasury committee states: 'We accept that there are benefits in tax simplification and that there are merits to focus on both the needs of children and motivation to work, but conclude that the group of main losers [more than five million low-income earners] from the abolition of the 10p rate of income tax seem an unreasonable target...'

There are times - too many times - when the Prime Minister seems to invite the accusation once levelled by Lord Salisbury at Iain Macleod (who was Edward Heath's Chancellor for a matter of weeks in 1970 before his premature death) that he is 'too clever by half'.

Let us hope for his sake, and the country's (to say nothing of the Labour Party), that things improve. But how? The big concern at the moment is the deteriorating outlook for the economy. This is not yet disastrous; despite the headlines, the International Monetary Fund's much publicised forecast of slower growth is within the range published in the Budget (admittedly at the bottom end). And so far the forecasts are of slower growth rather than outright recession - what economists call a 'growth recession', which, alas, does entail a rise in unemployment.

Brown's mistake was to give the impression - again trying to outsmart the Tories - that by handing over decisions about interest rates to an independent Bank of England, and by promising prudence with the nation's finances, he had in effect abolished, or seriously restricted, the workings of the business cycle. He was not as prudent as he promised and placed too much trust in the financial sector, which has rewarded him with a 'boom and bust' financial cycle and the credit crunch.

All eyes are now on the Bank of England, where the common theme of frequent pronouncements by members of the monetary policy committee is concern about the balance of risk between taking action to avoid recession by lowering interest rates, and stoking up inflationary pressures for the future. The Bank worries that higher prices of food and energy may provoke 'second round' inflationary effects, though that wise former MPC member Dr Sushil Wadhwani points out that 'there is remarkably little evidence of higher headline inflation having passed into higher wages. It does seem implausible that a period when much media reporting of the economy is gloomy could also be one when workers suddenly receive much higher wage gains.'

The problem is that, although the Bank's central forecast is for the consumer price index to return to target (2 per cent) in due course, there have been sharp increases in prominent items. The Bank no doubt worries that, as the new UK Statistics Authority has pointed out: 'The UK came 27th out of 27 in a recent survey within European countries of trust in their governments' statistics.'

That is one reason why the independent UK Statistics Authority has been set up. It is a welcome initiative by Gordon Brown, although some worry that, while being described as 'independent', it is not quite as independently powerful as it might be. However, in Whitehall veteran Sir Michael Scholar it has a chairman who is determined to make it so, and I wish him luck.